Home › Question of the day › 27 October 2026CFA® Level I question of the day
27 October 2026 · Equity Investments
When does a capitalisation-weighted index need trading?
Whenever any constituent's price moves When shares outstanding change Every month, without exception
Show the answer and explanation Answer: B. When shares outstanding change
Price moves adjust the weights automatically, which is why turnover is lowest for this scheme.
Why the other options are wrong:
A. Whenever any constituent's price moves - A price move changes the holding's value and its target weight by exactly the same proportion, so no trade is required. That is the scheme's defining property.C. Every month, without exception - Calendar rebalancing belongs to schemes whose weights drift. This one has no drift to correct.Open “Show the answer” above to check yourself.
Easy · EQ.3.c
· learning outcome: Explain how indexes are rebalanced and reconstituted
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Notes, formulas and a worked question for every learning outcome are on the
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